Citrini Research: Predicts a 38% Market Crash by 2028

The financial world has spent the last three years asking one question: “What if AI fails to live up to the hype?” But this week, a viral macro-analysis from Citrini Research flipped the script with a much more terrifying proposition: What if AI succeeds beyond our wildest dreams—and that success is exactly what destroys the economy?

Titled “The 2028 Global Intelligence Crisis (GIC),” the report has transitioned from a Substack “thought experiment” to a primary market mover. On Monday, February 23, 2026, major software and payment giants like IBM, ServiceNow, and Visa saw billions in market cap evaporate as investors began pricing in the “Citrini Research Scenario.”

Is this just “bear porn,” or have we finally found the “canary in the coal mine” for the white-collar economy?

The Intelligence Displacement Spiral: A Feedback Loop with No Brake

At the heart of the Citrini Research thesis is a concept called the Intelligence Displacement Spiral. In a traditional economic cycle, productivity gains lead to higher wages, which lead to higher consumption. But the GIC report argues that AI breaks this “circular flow.”

When a company replaces 15% of its workforce with agentic AI, its margins expand and its stock price rallies. However, the displaced workers—high-earning software engineers, analysts, and middle managers—suddenly stop spending. Because AI agents do not buy houses, take vacations, or pay for DoorDash, the “human economy” (which drives 70% of U.S. GDP) begins to wither.

To protect their margins against falling consumer demand, companies double down on automation, laying off even more humans. Citrini Research describes this as a “negative feedback loop with no natural brake.” By June 2028, the report models a U.S. unemployment rate of 10.2% and a cumulative 38% drawdown in the S&P 500.

The Rise of “Ghost GDP”

Perhaps the most controversial term in the report is “Ghost GDP.” This refers to economic output that appears in national accounts and corporate balance sheets but never actually circulates through the real economy.

Under this regime, productivity metrics look incredible. Real output per hour rises at rates not seen since the 1950s. On paper, the country is getting richer. But because that wealth is concentrated entirely in the “owners of compute” and the AI infrastructure itself, real wage growth for the bottom 90% collapses. The velocity of money—the rate at which a dollar moves from one person to another—flatlines.

“It’s an economic pandemic disguised as a panacea,” the report warns. “A single GPU cluster generating the output of 10,000 workers is efficient for the firm, but it’s a structural disaster for the tax base and the local deli.”

Sector Spotlight: Who Wins and Who Withers?

The Citrini Research report caused a “scare trade” this week specifically because it named names. Here is the sector-by-sector breakdown of the GIC framework:

1. The “Bits” Crisis (High Risk)

• Enterprise Software (SaaS): Companies like ServiceNow and Salesforce face a “mechanical destruction” of their revenue. When their clients cut headcount by 20%, they cancel 20% of their software seats. The very automation they sell is what shrinks their customer base.
• Payments & Friction: Visa, Mastercard, and American Express are described as “vulnerable to agentic commerce.” If AI agents route transactions through low-fee blockchain networks or stable coins to save their owners money, the 3% “interchange tax” disappears.

2. The “Atoms” Opportunity (The Winners)

While the report is largely somber, it highlights two sectors that will “accrue” all the gains of the AI era:

• Compute & Energy: NVIDIA, TSMC, and firms involved in nuclear energy (SMRs) and data center infrastructure.
• Commodities: As the world moves from “Bits” (software) to “Atoms” (hardware/power), materials like copper, lithium, and uranium become the ultimate scarcities.

The Counter-Argument: Why Citrini Could Be Wrong

No macro report is infallible. Critics of the Citrini Research memo argue that it ignores the “Schumpeterian” side of innovation—Creative Destruction.

• New Industry Creation: Historically, every job-killing technology has created more jobs than it destroyed. In 1900, people feared the automobile would destroy the “Blacksmith economy”; instead, it created the suburbs, the hotel industry, and the interstate system.
• The Wealth Effect: If AI makes goods and services 90% cheaper, the “real purchasing power” of the remaining workers could explode, creating a boom in leisure, healthcare, and artisanal “human-only” services.
• Policy Intervention: Governments are unlikely to sit idly by while the tax base vanishes. Discussions of an “Inference Tax” or “AI Dividends” are already beginning in 2026 to ensure the productivity gains are shared.

The $13 Trillion Mortgage Threat

The final “Left Tail” risk identified by Citrini is the U.S. housing market. Prime mortgages are built on the assumption that high-income white-collar professionals are the safest borrowers. If that income source is structurally impaired, the bedrock of the $13 trillion mortgage market—and the private credit deals that back them—could face a “2008-style” hollowing out, but for different reasons. This time, the loans weren’t “bad on day one”; the world simply changed after they were signed.

Investor Conclusion: Agility is the New Alpha

The Citrini Research report is a wake-up call to move past “Phase 1” of the AI trade. As we enter late 2026, investors must ask themselves: Is my portfolio built on the assumption that human intelligence will remain a scarce and expensive resource?

If the answer is yes, the 2028 GIC suggests it is time to pivot from “Software and Friction” toward “Energy and Infrastructure.” As Citrini and co-author Alap Shah concluded in their Bloomberg interview: “The system wasn’t designed for a crisis where intelligence becomes abundant and cheap. The repricing will be painful, but those who move first will survive.”

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